Where Americans shop — and how much they pay — could hinge on the outcome of a trial that begins Monday over whether the proposed merger of supermarket giants Kroger and Albertsons is likely to lead to higher prices for consumers.
The Federal Trade Commission in February filed a lawsuit Kroger and Albertsons have moved to block the $24.6 billion deal, arguing it would reduce competition in the industry, raise food prices and worsen working conditions. Kroger and Albertsons say the combination would benefit consumers by helping the combined company compete with discounters and online rivals.
The hearing in U.S. District Court in Portland, Oregon, is expected to last up to three weeks. Eight states and the District of Columbia are joining the FTC in asking the judge to temporarily halt the merger to give an administrative law judge time to review the case. Separate legal challenges have been filed by Colorado and the Washington will stop The merger is expected to begin in September.
Here’s how the merger could impact consumers and grocery costs, and why federal officials are seeking to block it.
What the FTC Says
Allowing Kroger and Albertsons to merge would limit competition in the grocery industry, giving both the combination more market power grocery store prices Prices remain high, FTC says. Big box chains and other retail giants are using their size to extract discounts from suppliers while continuing to keep prices above market levels, antitrust regulators say.
“Kroger’s acquisition of Albertsons would lead to additional price increases for everyday grocery items, further exacerbating the financial strain consumers across the country face today,” Henry Liu, director of the FTC’s Bureau of Competition, said in a statement earlier this year.
The FTC also says the deal would make it harder for unions to negotiate stronger labor contracts, a right protected under federal law, particularly in states where the two chains have stores near each other.
What Kroger and Albertsons Say
Kroger and Albertsons cited growing competition from Walmart and Costco as behind their decision to join forces in announcing their agreement in end of 2022. The companies also say there is little geographic overlap in their stores.
Kroger, headquartered in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands such as Ralphs, Smith’s and Harris Teeter. Albertsons, headquartered in Boise, Idaho, operates 2,273 stores in 34 states, including brands such as Safeway, Jewel Osco and Shaw’s. Together, these companies employ about 710,000 people.
“Albertsons Cos. brings a complementary footprint and operates in multiple regions of the country with few, if any, Kroger stores,” Kroger CEO Rodney McMullen, who will lead the expanded company, said in a statement announcing the deal.
In defending the merger, Kroger said last week that it would lower prices for customers and improve job security for employees. The company also said recently that the deal would reduce grocery costs by $1 billion. Kroger and Albertsons said they would spend $1 billion to increase employee wages and benefits and invest $1.3 billion to improve Albertsons stores.
What impact would the agreement have?
Consumer prices are in focus in the US presidential election, with Vice President Kamala Harris calling earlier this month for a ban on abusive prices by food suppliers and grocery stores.
Profits at major grocers have surged during the pandemic, with the largest players widening their lead over smaller supermarket chains, the FTC said in a March report.
“As the pandemic has shown, a major shock to the supply chain can have cascading effects on consumers, including on the prices they pay for their groceries,” FTC Chairwoman Lina Khan said in a statement at the time.
“The FTC’s report examining America’s grocery supply chains reveals that dominant companies have used this moment to gain the upper hand at the expense of their competitors and the communities they serve,” added Khan, a former law professor and congressional antitrust adviser who took over the FTC in June 2021.
The impact on consumers could depend on where they live, according to John Mayo, executive director of the Center for Business and Public Policy at Georgetown University’s McDonough School of Business. His research has shown that deals in markets with few competitors often lead to higher prices, while food costs in more competitive areas have fallen after major mergers.
—The Associated Press contributed to this report.
